Analysts see KKR-led STT GDC deal accelerating Singtel’s push to digital infrastructure

[SINGAPORE] A S$6.6 billion deal led by private equity giant KKR, alongside Singtel, to acquire Singapore-based ST Telemedia Global Data Centres (STT GDC) is expected to propel the telco to a top-tier position in the Asia-Pacific data centre space.

It also positions Singtel for future growth and accelerates the group’s push towards digital infrastructure as a core growth engine.

The deal was announced by Singtel in a bourse filing on Wednesday (Feb 4); KKR and Singtel will acquire the remaining 82 per cent stake that they do not own from STT GDC’s parent company, ST Telemedia.

This deal comes as demand for data centres is soaring, with companies increasing their reliance on data centres to train and develop artificial intelligence (AI) models.

A regional data centre giant

With this deal, Singtel will be placed as one of the largest data centre players in the Asia-Pacific region, said Hussaini Saifee, analyst at Maybank Securities.

Nxera – Singtel’s own data centre arm – and STT GDC will continue operating independently.

The telco said Nxera will focus on “next-generation AI-ready infrastructure”, while STT GDC will focus on “global scale cloud infra-backbone with next-generation AI capabilities”.

STT GDC has a pipeline of more than 100 data centres in over 20 markets worldwide, including Singapore, Germany and Malaysia, with a total IT load of 2.3 gigawatts (GW).

IT load refers to the total core energy demand that infrastructure systems need to support.

“STT GDC is well-positioned within (the digital infrastructure landscape), with a diversified footprint, strong development pipeline and a leadership team with a clear vision for global scale,” said David Luboff, co-head of KKR Asia-Pacific and head of Asia-Pacific infrastructure at KKR.

Stephen Miller, president and group chief executive officer of ST Telemedia, said the exponential trajectory of the data centre sector now requires a “different scale of capital” for STT GDC’s next phase of growth.

Cumulatively, the data centre operators will have about 2.8 GW of design capacity, based on total design capacity and pipeline.

Singtel chief financial officer Arthur Lang said the acquisition is a “significant step towards scaling our new growth engine in digital infrastructure as mapped out in our Singtel28 growth plan”. The three-year plan, which started in 2024, is aimed at delivering sustained shareholder value.

Lang added that the dividend and plan for Singtel28 remain intact.

Analysts, too, believe that the next stage of growth opportunities for Singtel will come from digital infrastructure.

Maybank’s Saifee noted that Singtel expects between 30 and 35 per cent of earnings before interest, tax, depreciation and amortisation (Ebitda) to come from its growth engines: AI, data centres and its subsidiary NCS.

Paul Chew, head of research at Phillip Securities Research, added that the deal lays the foundation for future growth, especially post-Singtel28.

Bloomberg Intelligence, too, noted that the acquisition will accelerate the group’s pivot towards digital infrastructure as a core growth engine. While doing so, it will be able to diversify market exposure to mitigate geopolitical risks.

With both Nxera and STT GDC operating in the data centre space, Chew expects both entities to eventually merge.

However, Saifee downplayed the possibility, adding: “For the existing operations, we see limited clashes in Singapore as the market is really tight.”

Strong balance sheet

Singtel said the transaction is expected to have minimal impact on the group’s financial position. Despite the S$740 million cash outlay, analysts believe that it will not impact the telco’s growth.

Saifee pointed out that the group’s balance sheet is in a strong position with about 1.1 times net debt to Ebitda. He expects the net debt to Ebitda to increase only by a factor of 1.2 times on the back of STT GDC investments.

He added that Singtel has identified a potential pipeline of about S$10 billion to S$15 billion worth of assets for capital recycling.

Deal details

The acquisition implies an enterprise value of S$13.8 billion for STT GDC, including leverage and capital expenditure for committed projects.

The transaction is expected to close in the early part of H2 2026.

Upon completion, KKR and Singtel will own stakes of 75 per cent and 25 per cent, respectively, in the company, taking into account the conversion of existing redeemable preference shares that both companies hold in STT GDC.

Singtel said it will be contributing S$740 million in cash.

The Business Times understands that sovereign wealth funds GIC and Mubadala will be involved as indirect minority investors.

“We welcome the next chapter for STT GDC with KKR and Singtel,” said Ravi Lambah, head of strategic initiatives at Temasek, the majority owner of Singtel that also wholly owns ST Telemedia.

“As a long-term shareholder of STT, Temasek has supported ST Telemedia and STT GDC’s management teams and invested across multiple stages of ST Telemedia’s growth journey, helping to build a strong foundation for STT GDC’s next wave of opportunities,” he added.

Private equity moves in the data centre sector

This deal marks the latest move by KKR and Singtel in Asia’s data centre sector.

In 2023, KKR invested up to S$1.1 billion for a 20 per cent stake in Singtel’s regional data centre business. This deal put the enterprise value of Singtel’s overall regional data centre business at S$5.5 billion.

The same deal will allow KKR to increase its stake to 25 per cent by 2027 at the pre-agreed valuation.

KKR’s investment in data centres is part of its strategy to invest in digital infrastructure. Excluding the current transaction, it has 23 investments and over US$31 billion equity invested across data centres, fibre and mobile worldwide.

In late 2024, Michael Tanujaya, head of investments and strategy at STT GDC, said private equity firms had been sitting on “dry powder” – or unspent capital – for “the longest time”.

Shares of Singtel closed 1 per cent or S$0.05 higher at S$4.91 on Wednesday.